Auditing Chapter 16

The search for unrecorded liabilities for public company includes procedures usually performed through the:

Date of the auditors' report

When auditing the statement of cash flows, which of the following would an auditor NOT expect to be a source of receipts and payments?

Capitalization

As a result of analytical procedures, the independent auditors determine that the gross profit percentage has declined from 30 percent in the preceding year to 20 percent in the current year. The auditors should:

Consider the possibility of a misstatement in the financial statements

Which of the following is most likely to be considered a Type 1subsequent event?

Customer checks deposited prior to year-end, but determined to be uncollectible after year-end.

An auditor accepted an engagement to audit the 20X8 financial statements of EFG Corporation and began the fieldwork on September 30, 20X8. The auditor completed the audit on February 10, 20X9, and delivered the report on February 16, 20X9. The client's representation letter normally would be dated:

February 10, 20X9

A possible loss, stemming from past events that will be resolved as to existence and amounts, is referred to as a(n)

Loss contingency

Which of the following is most likely to be included near completion of an audit?

Perform analytical procedures

Which of the following events occuring on January 5, 20X2, is most likely to result in an adjusting entry to 20X1 financial statements?

Settlement of litigation

Subsequent to the issuance of the auditor's report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of such facts. After determining that the information is reliable, the auditor should next:

Determine whether there are persons relying or likely to rely on the financial statements who would attach importance to the information

The aggregated misstatement in the financial statements is made up of:

Known Misstatements(yes), Projected Misstatements(yes), Other Misstatements(yes)

Which of the following is the best way for the auditors to determine that every name on a company's payroll is that of a bona fide employee presently on the job?

Make a surprise observation of the company's regular distribution of paychecks on a test basis

Which of the following is LEAST likely to be considered a substantive procedure relating to payroll?

Test whether employee time reports are approved by supervisors